Who Killed Wal-Mart’s Business Model?

For more than three decades, Wal-Mart ruled the US retailing industry. Its large stores and everyday low prices were too much for smaller neighborhood stores and supermarkets that ended belly-up shortly after Wal-Mart invaded their turf.

That’s how Wal-Mart ended with close to a half-trillion in sales, dwarfing the economies of smaller countries.

But in recent years, Wal-Mart’s business model seems to have headed for the graveyard,and the company has closed scores of stores. Apparently, what used to be an asset for Wal-Mart has turned into a liability.

Who killed Wal-Mart’s business model? There is a long list of suspects.

Top on the list is Amazon.  Its remote location warehouses, expedient delivery and razor-thin margins have given Amazon a price advantage over Wal-Mart. Not to mentionthat the proliferation of smartphone and tablets turned Wal-Mart into a storefront for Amazon.

Next on the list is a surge in minimum wage hikes across the country and the proliferation of labor unrest in Wal-Mart stores, which has undermined another driver behind Wal-Mart’s stellar performance: cheap labor.

Then comes Costco, which has lured away the more affluent shoppers,  leaving Wal-Mart with shoppers with the less affluent — shoppers with stretched budgets, relying on social security and other government benefits to pay for their purchases at the cash register, according to a recent study.

Of course, Wal-Mart has been fighting back, especially against Amazon by pouring enormous resources into online-retailing with a well-crafted strategy that includes  acquisition of on-line search technologies and building of warehouses.

In 2013, for instance, @WalmartLabs, Wal-Mart’s e-commerce technology arm, acquired four start-ups: Torbit, a cloud-based website accelerator service; Inkiru, a predictive intelligence platform; OneOps, a cloud based automation technology; and Tasty Labs.

More recently, Wal-Mart acquired Adchemy, a search engine marketer.

Still, it may be too little too late. Wal-Mart’s traditional model is already dead. Amazon, minimum wage hikes, and Costco killed it.

Source: Forbes

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